Surging Gold Prices in India

Researchers are bullish on the yellow metal and claims that gold price may rise to Rs.65,000.00 (Per 10gm, 24k). As on july,2020 average gold price in India has already crossed Rs.55,000.00.

 In the past few months, there has been a lot of buzz around the gold prices. It is rising at a massive speed. So, is it Just a bubble? Or something concrete? Let us try to find out.

 Normally, price of any commodity is the outcome of demand and supply play but in year 2020 COVID- 19 Pandemic has worked favorable for gold along with other couple of aspects for surging the price of yellow metal.

Let us look at the past data of last 10 years to have an idea of the price.

So, after the above analysis we can conclude that the rise in gold price in year 2020 is far deviated from the past 20 years. Year 2020 has been the year of lot of uncertainties. COVID -19 situation has poured along with several other factors that has led to the increase in the prices. So, let us look at the few of the reasons that has contributed to hike gold price.

Global Factors:-

Pune-headquartered jewelry brand PN Gadgil managing director and CEO Saurabh Gadgill said,

“The gold price is likely to spike further in the next 12 months following the US elections, COVID-19 related disruptions and geopolitical tensions”.

“We are expecting gold to reach around Rs. 65,000 per 10 grams in the domestic market in the next 12 months, while hitting USD 2,500 an ounce in the international markets,” he opined.

The global movement of gold prices influences gold prices in India. Since India is the massive importer of gold so, change in gold price globally, turns to change in import prices in India. COVID -19 Pandemic, International border tensions, trade wars, US-China Cold war, poorer crude& oil prices, falling US dollar are few of the factors that are fueling to the gold prices globally in turn increasing the gold prices in India.

Inflation:-

When inflation rises, the value of currency goes down and therefore people tend to hold money in the form of gold.

Therefore, in times when inflation remains high over a longer period, gold becomes a tool to hedge against inflationary conditions. This pushes gold prices higher in the inflationary period.

Due to COVID-19, prices of many things have increased, due to which people fear that inflation may increase in the future, so it is better to invest in gold.

So, Gold can be said as Inflation proof investment.

Interest Rates:-

In the recent time, interest rates on various government securities have reduced and COVID-19 pandemic is definitely the culprit. Most of the saving schemes in the country like savings account in banks, Post Office Savings Account, Kisan Vikas Patra (KVP), Public Provident Fund (PPF), Sukanya Samriddhi Yojana, National Savings Certificate and fixed deposits, etc. have decreased.

So, gold is ruling the roost as a safe haven for investing.

Indian gold market:- Love for jewelry in India is not a hidden fact. India is one of the largest consumer of gold worldwide.

Be it festivals or birthdays, gold jewelry holds a special place in Indian households. There is hardly any Indian wedding, which is devoid of Gold charms.

Since Dhanteras and Diwali are one the way, there are obvious chances that gold prices will escalate further.

Safe investment tool: – Since COVID-19 outbreak, Equity market is sluggish and there is lot of risk in the market and major fluctuations in stock is happening.

When the Sensex falls, the price of gold starts increasing because, Investing in gold is considered to be the safest because there is not very big fluctuation in its prices and it keeps on giving a fixed return to the investors. So, people find gold as safe mode of investment.

So, concluding gold prices will rise firmly until the economy revives and COVID-19 is contained. As long as equity market is precarious, people will channelize their investments in the precious metals from which gold always tends to standout.